BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 1602
                                                                  Page  1

          Date of Hearing:   April 20, 2010

                            ASSEMBLY COMMITTEE ON HEALTH
                              William W. Monning, Chair
                AB 1602 (John A. Perez) - As Amended:  April 15, 2010
          SUBJECT  :  Health care coverage.

           SUMMARY  :  Enacts the California Patient Protection and  
          Affordable Care Act to implement reforms under the federal  
          Patient Protection and Affordable Care Act (Affordable Care Act)  
          in California.  As such, prohibits group or individual health  
          care service plans or health insurers (collectively carriers)  
          from establishing lifetime or unreasonable annual limits on the  
          dollar value of benefits. Requires carriers to provide minimum  
          coverage for specified preventive services.  Prohibits carriers  
          from imposing preexisting condition exclusions for enrollees or  
          insureds under 19 years of age.  Prohibits the limiting age for  
          dependent health care coverage to be less than 26 years of age.   
          Creates the California Health Benefit Exchange (Exchange) for  
          the purchase of health care coverage.  Specifically,  this bill  :   

           Lifetime Limits

           1)Prohibits carriers, effective September 23, 2010, from  
            establishing lifetime limits on the dollar value of benefits  
            for any participant or beneficiary.  With respect to plan  
            years prior to January 1, 2014, permits a group or individual  
            health care service plan contract, after September 23, 2010,  
            to only establish a restricted annual limit for the scope of  
            benefits that are "essential health benefits" under the  
            Affordable Care Act, with prior approval from by United States  
            Secretary of Health and Human Services (DHHS).

           Minimum Coverage for Preventive Services

           2)Requires carriers, effective September 23, 2010 and subject to  
            the minimum interval established by DHHS Secretary pursuant to  
            the federal Affordable Care Act, to provide coverage, without  
            any cost sharing requirements, for: 
             a)   Immunizations that have in effect a recommendation from  
               the Advisory Committee on Immunization Practices of the  
               federal Centers for Disease Control and Prevention.
             b)   Evidence-informed preventive care and screenings for  


                                                                  AB 1602
                                                                  Page  2

               infants, children, adolescents, and women provided for in  
               the comprehensive guidelines supported by the federal  
               Health Resources and Services Administration and other  
               services that meet federal standards, as specified.

          3)Prohibits anything in this bill from being construed to  
            prohibit a plan from providing coverage for services in  
            addition to those recommended by the United States Preventive  
            Services Task Force or to deny coverage for services that are  
            not recommended.

           Prohibition against Pre-existing Conditions

           4)Prohibits health plans, effective September 23, 2010, from  
            imposing any preexisting condition exclusion with respect to  
            coverage under the plan of any enrollee under 19 years of age.  

          5)Exempts health plan contracts or health insurance policies  
            that are not required to provide essential health benefits, as  
            defined, from this provision. 

           Dependent Coverage

           6)Prohibits the limiting age for dependent health care coverage  
            to be less than 26 years of age, except as specified. 

          7)Prohibits the limiting age provision from requiring specified  
            public employers to pay the cost of coverage for dependents  
            who between 23 and 26 years of age.  Permits employees of  
            those entities to elect to provide coverage to dependents  
            between 23 and 26 years of age, provided they contribute the  
            premium for that coverage. 

          8)Requires employment contracts subject to collective bargaining  
            that are issued, amended, or renewed on or after September 23,  
            2010 to be subject to the limiting age provisions.  Exempts  
            employment contracts subject to collective bargaining that are  
            effective prior to September 23, 2010 from this provision. 
          The Exchange

           9)Creates the Exchange, governed by an executive board  
            consisting of an unspecified number of members, to be  
            appointed by the Governor, the Senate Committee on Rules, and  


                                                                  AB 1602
                                                                  Page  3

            the Speaker of the Assembly.  Requires the board to be  
            responsible for using the funds awarded by DHHS for the  
            planning and establishment of the Exchange.

          10)Requires the board to, at a minimum:  

             a)   Implement procedures for the certification,  
               recertification, and decertification, consistent with  
               guidelines established by DHHS, of health plans as  
               qualified health plans;
             b)   Provide for the operation of a toll-free telephone  
               hotline to respond to requests for assistance;
             c)   Maintain an Internet Web site through which enrollees  
               and prospective enrollees of qualified health plans may  
               obtain standardized comparative information on such plans;
             d)   Assign a rating to each qualified health plan offered  
               through the Exchange in accordance with the criteria  
               developed by the Secretary;
             e)   Utilize a standardized format for presenting health  
               benefits plan options in the Exchange, including the use of  
               the uniform outline of coverage established under the  
               federal Patient Protection and Affordable Care Act ;
             f)   Inform individuals of eligibility requirements for the  
               Medi-Cal Program, the Healthy Families Program, or any  
               applicable state or local public program, and if through  
               screening of the application, the Exchange determines that  
               such individuals are eligible for any such program, enroll  
               such individuals in such program;
             g)   Establish and make available by electronic means a  
               calculator to determine the actual cost of coverage after  
               the application of any premium tax credit and any cost  
               sharing reduction, as specified;


                                                                  AB 1602
                                                                  Page  4

             h)   Grant a certification attesting that, for purposes of  
               the individual responsibility penalty under existing  
               federal law, an individual is exempt from the individual  
               requirement or from the penalty imposed because:
               i)     There is no affordable qualified health plan  
                 available through the Exchange, or the individual's  
                 employer, covering the individual; or
               ii)    The individual meets the requirements for any other  
                 such exemption from the individual responsibility  
                 requirement or penalty;
             i)   Transfer specified information to the Secretary of the  
               Treasury; and 
             j)   Provide to each employer the name of each employee who  
               ceases coverage under a qualified health plan during a plan  
               year (and the effective date of such cessation).

          11)Permits the board, consistent with the standards,  
            regulations, and rules promulgated by DHHS, to:
             a)   Determine eligibility, enrollment, and disenrollment  
               criteria and processes for enrollees and potential  
               enrollees in the Exchange;
             b)   Determine participation requirements, standards, and  
               selection criteria for qualified health plans, including  
               reasonable limits on a plan's administrative costs;
             c)   Determine when an enrollee's coverage commences and the  
               extent and scope of coverage;
             d)   Determine premium schedules, collect the premiums, and  
               administer subsidies to eligible enrollees and rates paid  
               to participating plans;
             e)   Determine rates paid to qualified health plans;
             f)   Provide for the processing of applications and the  
               enrollment and disenrollment of enrollees;
             g)   Determine and approve the cost-sharing provisions for  
               qualified health plans;
             h)   Conduct various administrative functions;
             i)   Maintain enrollment and expenditures to ensure that  
               expenditures do not exceed the amount of revenues in the  
               fund, and if sufficient revenue is not available to pay  
               estimated expenditures, institute appropriate measures to  
               ensure fiscal solvency; and,
             j)   Share information with the Employment Development  
               Department for the purpose of the administration and  
               enforcement of the Exchange.

          12)Requires the Exchange to facilitate the purchase of qualified  


                                                                  AB 1602
                                                                  Page  5

            health plans to qualified individuals and qualified employers  
            by January 1, 2014.

           California Health Trust Fund

           13)Creates the California Health Trust Fund (Fund) in the State  
            Treasury for the purpose of this bill.  Requires all moneys in  
            the Fund to be continuously appropriated without regard to  
            fiscal year and permits any unexpended or unencumbered moneys  
            in the Fund to be carried forward.  

          14)Requires the board to establish and maintain a prudent  
            reserve in the Fund.  

           FISCAL EFFECT  :   This bill has not been analyzed by a fiscal  


                                                                  AB 1602
                                                                  Page  6

           COMMENTS  :   

           1)PURPOSE OF THIS BILL  .  According to the author, given the  
            recent passage of the Affordable Care Act, California must  
            begin the important task of implementing federal law.  Several  
            of the federal health reform provisions take effect this year,  
            including the change in the limiting age, the ban on lifetime  
            limits, and the end of pre-existing condition exclusions for  
            children.  This bill is a necessary first step towards  
            enacting these important insurance market reforms.   
            Additionally, federal health reform tasks the states with  
            establishing the new, organized marketplaces where individuals  
            and small businesses can more readily identify and compare  
            coverage choices; purchase value based coverage, and access  
            premium credits and cost sharing subsidies.  This bill  
            establishes the California Health Benefit Exchange to enact  
            these key changes, and sets in motion the necessary duties to  
            ensure California can quickly use the federal planning dollars  
            and commence operations by January 1, 2014.

           2)FEDERAL HEALTH CARE REFORM  .  On March 23, 2010, President  
            Obama signed the Affordable Care Act; P. L. 111-148, as  
            amended by the Health Care and Education Reconciliation Act of  
            2010; P. L. 111-152.  Among other provisions, the new law  
            makes statutory changes affecting the regulation of and  
            payment for certain types of private health insurance.  There  
            are a number of health insurance provisions that will take  
            effect in 2010, including those related to this bill:

            Young Adults on Parents' Health Plans.  Young adults may stay  
            on their parents' health plans to age 26, effective September  
            2010.  The provision applies to all health plans, and does not  
            exclude young adults who are married. 

            Prohibition on Preexisting Condition Exclusions for Children.   
            Insurers are prohibited from excluding coverage of preexisting  
            conditions for children in the individual market, effective  
            six months after enactment.  According to a March 28, 2010 New  
            York Times news article, just days after the President signed  
            the Affordable Care Act, there was a dispute over the language  
            in the law regarding the pre-existing conditions coverage  
            provisions.  The New York Times article stated that while  
            insurers agreed that health insurance carriers offering  
            individual or group coverage were unable to impose preexisting  
            condition exclusions beginning in September, insurers  


                                                                  AB 1602
                                                                  Page  7

            initially disagreed that the law required them to write  
            insurance  at all  for the child or family, providing what they  
            call in the insurance world "guaranteed issue" until 2014.

            The Secretary of DHHS issued clarification in a letter to the  
            president of America's Health Insurance Plans (AHIP) stating  
            that, "To ensure that there is no ambiguity on this point, I  
            am preparing to issue regulations in weeks ahead ensuring that  
            the preexisting condition exclusion applies to both a child's  
            access to a plan and his or her benefits once he or she is in  
            the plan."  The Secretary further noted that regulations would  
            make clear that by September, "children with pre-existing  
            conditions may not be denied access to their parents' health  
            insurance plans."  In response, AHIP's president wrote to the  
            Secretary that AHIP would accept the clarification of the new  
            law and, fully comply with it.  

            Prohibitions Against Lifetime Benefit Caps.  Group health  
            plans or insurance companies providing group or individual  
            market coverage are prohibited from setting lifetime limits on  
            the dollar value of benefits and from setting unreasonable  
            annual limits on the dollar value of benefits, effective six  
            months after enactment. Annual limits will be banned  
            completely in 2014. 

           3)STATE INSURANCE EXCHANGES  . Each state is required to establish  
            an American Health Benefit Exchange and a Small Business  
            Health Options Program Exchange by 2014 for individuals and  
            small employers with 50 to 100 employees; after 2017, states  
            have the option of opening the small business exchange to  
            employers with more than 100 employees.  States can opt to  
            provide a single exchange for individuals and small employers.  
            Groups of states can form regional exchanges or states can  
            form more than one in-state exchange, but the exchanges must  
            serve a geographically distinct area.  While the individual  
            and small-group markets will not be replaced by the exchanges,  
            the same market rules will apply inside and outside the  
            exchanges.  Premium subsidies can be used only for plans  
            purchased through the exchanges.  If DHHS determines in 2013  
            that a state will not have an exchange operational by 2014,  
            DHHS is required to establish and operate an exchange in the  
            state.  In 2017, states will have the opportunity to opt out  
            of the federal requirements to establish insurance exchanges  
            through a five-year waiver, if they are able to demonstrate  
            that they can offer all residents coverage at least as  


                                                                  AB 1602
                                                                  Page  8

            comprehensive and affordable as that required by this bill. 

            Federal responsibilities.  DHHS' responsibilities with respect  
            to the exchanges include: establishing certification criteria  
            for "qualified health plans" that will be sold through the  
            exchanges; requiring such plans to provide the essential  
            benefits package; requiring that the licensed insurance  
            carriers issuing plans offer at least one qualified health  
            plan at the silver and gold levels and meet marketing  
            requirements; ensuring a sufficient choice of providers; and,  
            ensuring that essential community providers are included in  
            networks, are accredited on quality, implement a quality  
            improvement strategy, use a uniform enrollment form, present  
            plan information in a standard format, and provide data on  
            quality measures.  In addition, the Secretary will develop a  
            rating system for qualified health plans and a model template  
            for an exchange's Internet portal, and determine an initial  
            and open enrollment period as well as special enrollment  
            periods for people under varying circumstances.  The Secretary  
            is also required to establish procedures under which states  
            may allow agents or brokers to enroll individuals in qualified  
            health plans and assist them in applying for subsidies.  Such  
            procedures may include the establishment of rate schedules for  
            broker commissions paid by health plans offered through the  

            State responsibilities.  The state exchanges will be required  
            to certify qualified health plans, operate a toll-free hotline  
            and Web site, rate qualified health plans, present plan  
            options in a standard format, inform individuals of the  
            eligibility requirements for Medicaid and the Children's  
            Health Insurance Program, provide an electronic calculator to  
            calculate plan costs, and grant certifications of exemption  
            from the individual requirement to have health insurance.   
            Exchanges will be required to be self-sustaining by 2015 and  
            will be allowed to charge assessments or user fees to  
            participating health insurance issuers or otherwise generate  
            funding to support their operations.  The exchanges also will  
            award grants to "navigators" who will educate the public about  
            qualified health plans, distribute information on enrollment  
            and subsidies, facilitate enrollment, and provide referrals on  
            grievances. Navigators may include trade and professional  
            organizations, farming and commercial fishing organizations,  
            community and consumer-focused nonprofit groups, chambers of  
            commerce, unions, or licensed insurance agents or brokers. 


                                                                  AB 1602
                                                                  Page  9

            Qualified employers purchasing through the exchange.   
            Employers that are qualified to offer coverage to their  
            employees through the exchange may provide premium support for  
            a level of coverage (bronze, silver, gold, platinum) and  
            employees may choose a plan within the designated level. 

           4)RELATED LEGISLATION  .  There are a number of bills related to  
            the implementation of federal health care reform in  

            AB 1595 (Jones) commencing January 1, 2014, to the extent  
            required by the Affordable Care Act, requires persons who  
            meets all other applicable eligibility requirements to be  
            eligible for benefits under the Medi-Cal program if his or her  
            income does not exceed 133% of the federal poverty level.  AB  
            1595 is set for hearing on April 20, 2010 in the Assembly  
            Health Committee.

            AB 1887 (Villines) establishes the state temporary high risk  
            pool program in order to be eligible for high risk pool funds  
            under the Affordable Care Act.  AB 1887 is set for hearing on  
            April 20, 2010 in the Assembly Health Committee.

            AB 2345 (De La Torre) requires carriers, after January 1,  
            2011, to meet the requirements of specified provisions of the  
            federal Public Health Service Act, related to federal health  
            care reform.  AB 2345 is set for hearing on April 20, 2010 in  
            the Assembly Health Committee.

            AB 2244 (Feuer) among other things, prohibits carriers from  
            denying coverage on the basis of an actual or expected health  
            condition effective January 1, 2011 for children and effective  
            January 1, 2014 for adults.  AB 2244 is set for hearing on  
            April 20, 2010 in the Assembly Health Committee.

            AB 2477 (Jones) deletes the provision that requires Mid-Year  
            Status Reports for children from January 1, 2011 to July 1,  
            2012, therefore establishes continuous eligibility for  
            children in the Medi-Cal Program.  AB 2477 is pending in the  
            Assembly Appropriations Committee.

            SB 900 (Alquist) establishes the California Health Benefits  
            Exchange within the California Health and Human Services  
            Agency and would requires the Exchange to, among other things,  


                                                                  AB 1602
                                                                  Page  10

            implement specified functions imposed by the Affordable Care  
            Act.  SB 900 is set for hearing in the Senate Health Committee  
            on April 21, 2010.

            SB 1088 (Price) prohibits, with a specified exceptions, the  
            limiting age for dependent children from being less than 27  
            years of age.  SB 1088 is set for hearing in the Senate Health  
            Committee on April 21, 2010.

           5)PREVIOUS LEGISLATION  .  AB 8 (Nunez) of 2007 and AB 1 X1  
            (Nunez) of 2007, would have established a comprehensive  
            package of health care reforms, including creating a statewide  
            health care purchasing program (California Health Insurance  
            Purchasing Program, or Cal-CHIPP); modifying rules governing  
            private individual and group health insurance; initiating and  
            expanding health care quality and cost measurement activities;  
            and establishing administrative and funding mechanisms to  
            support the reforms.  AB 8 (Nunez) was vetoed by Governor  
            Schwarzenegger and AB 1 X1 failed passage in the Senate Health  
          6)SUPPORT  .  The California Retired Teachers Association, writing  
            in response to a previous version of this bill, writes that  
            this bill will provide clarity and structure for implementing  
            the new federal health care reform legislation. 
          7)SUPPORT IF AMENDED  .  The California Chiropractic Association  
            requests and amendment to include chiropractic care as a  
            coverage option.
          8)CONCERNS  .  Health Net, writing in response to a previous  
            version of this bill, states that they will work collaborative  
            with the Legislature and regulators to implement federal  
            health care reform, including the creation of an exchange.   
            Health Net further states that their preliminary review of  
            this bill found that there are some provisions that do not  
            follow the authority as set forth in federal health care  
            reform.  The California Association of Health Plans (CAHP),  
            also writing in response to a previous version of this bill,  
            states that this bill includes a number of provisions that  
            point towards an Exchange that is intended to be at its core,  
            a purchaser of services.  CAHP states that they are still  
            formulating their opinion on this concept and many other  
            aspects of the bill.  


                                                                 AB 1602
                                                                  Page  11

          9)OPPOSITION  .  Anthem Blue Cross, writing in response to a  
            previous version of this bill, states that this bill will  
            limit consumer choice and set up onerous rate setting  
            requirements.  Anthem further states that this bill would not  
            establish an exchange that meets the requirements of the  
                                                                               Affordable Care Act while maintaining a functional health  
            insurance market place and ensuring consumer choice.  


          California Retired Teachers Association

          Anthem Blue Cross
          Analysis Prepared by  :    Melanie Moreno / HEALTH / (916)